UPDATE: Deutsche Bank Upgrades Monsanto To Buy Following Management Meeting

Deutsche Bank's meeting with Monsanto's MON CEO increased its confidence that the company is pursuing the right strategy of establishing its new corn and soybean platforms and rebuilding its reputation with farmers while raising prices only moderately despite record commodity prices. While Monsanto is leaving money on the table in the short-term, Deutsche Bank believes its strategy will drive share gains and mid-teens EPS growth over the next 3 years. With valuation attractive at 19.8x '12E EPS following a 10% decline in the shares last week, DB upgrades MON to Buy with a $78 price target. Seed prices will be further increased to offset higher corn and soybean seed production costs. However, seed prices will not be raised to reflect value capture on $7.70/bu corn or $14/bu soybeans as this would jeopardize the goodwill gains Monsanto has won with farmers this year. Still, given Monsanto's hedging mechanisms which will result in its ‘12 production costs rising at a slower rate than commodity prices, there is an opportunity for Monsanto to raise its seed prices above its production costs but below the increase in unhedged production costs. MON is trading higher at $67.28